Jackson Company produces plastic that is used for injection-molding applications such as gears for small motors. In 2016, the first year of operations, Jackson produced 4,900 tons of plastic and sold 3,920 tons. In 2017, the production and sales results were exactly reversed. In each year, the selling price per ton was $2,500, variable manufacturing costs were 18% of the sales price of units produced, variable selling expenses were 8% of the selling price of units sold, fixed manufacturing costs were $3,626,000, and fixed administrative expenses were $510,000. Prepare Income statement for variable costing and absorption costing.

Reconcile the differences each year in net income under the two costing approaches.